NEW DELHI, March 1 (Reuters) - India's finance minister P.
Chidambaram appealed to people not to buy so much gold as a way
of reducing hefty imports, speaking on television a day after
his 2013/14 budget surprised traders by keeping gold import duty
unchanged at 6 percent.

But Chidambaram, who is trying to rein in imports by the
world's biggest bullion buyer to curb a record current account
deficit, told CNBC television on Friday the duty was not yet
high enough to increase smuggling.

"I'm hoping that the people of India will heed my appeal and
will not demand so much gold," Chidambaram said.

Traders had expected a rise in duty to 8 percent in the
budget after a 50 percent hike on Jan. 21 from 4 percent was
neutralised by falling global prices.

Chidambaram said on Friday the higher import duty had
"brought down gold imports to some extent."

But, traders said buying actually picked up after a more
than 2 percent drop in prices triggered by a strong dollar.

"After the import duty, prices went down by 3,000 rupees
($55.14) and that spurred buying," said Kumar Jain,
vice-president of the 12,000-member Mumbai Jewellers
Association.

Indians, for centuries obsessed with gold as a mark of
wealth and investment, imported 860 tonnes of gold in 2012, down
just 11 percent on a year earlier despite record high prices in
the second half.

Raising duty too much risks encouraging illegal imports of
gold but Chidambaram said he did not think taxes were high
enough for that yet.

"There is a point at which more duties will only tempt
people to indulge in more smuggling. I don't think we have
reached that point yet," he added.

Gold is second only to essential crude oil in the import
bill of Asia's third-largest economy, with coal and edible oils
also costly items.

Chidambaram said ways to tackle the current account deficit,
which hit 5.4 percent of gross domestic product (GDP) in the
July to September quarter, were by encouraging domestic
production and boosting exports.
($1 = 54.4050 Indian rupees)
(Reporting by Manoj Kumar in New Delhi and Siddesh Mayenkar in
Mumbai; writing by Jo Winterbottom; editing by Keiron Henderson)